Chinese disappointing results and renewed tensions in Crimea are weighing down on FTSE 100

The FTSE 100 has been on a downtrend since last week and as I explained in my previous letter the UK benchmark index is strongly tied to the situation in the Crimea. Global stock markets have been hit by a risk aversion sentiment this week and even though the spark came from far away the renewed fears of a military intervention in the Crimea region added fuel to the fire.

The spark I am talking about was the disappointing export figures that China announced at the start of the week. China has been a major catalyst for global growth during this decade but recent results indicate that the nation’s economic outlook is not looking as bright as before.

Chinese Industrial Production and Retail Sales disappointed investors worldwide and this development has taken its toll on the stock markets and the FTSE could not avoid being affected. The UK index dropped from the yearly highs of 6,880 and even though the 6,670 support area offered a minor pullback the latest rumors concerning the Russia-Ukraine stand-off drove the FTSE significantly lower on Thursday.

According to the acting Ukrainian President Russia is ready to invade and the risk-off sentiment hit markets worldwide. German Foreign Minister Steinmeier made things worse when he said that Russia seems to have made the decision to annex Crimea and that the EU is preparing to discuss sanctions against them.

Given these recent developments, it becomes obvious that the situation appears to escalate once again and hopes for a peaceful resolution to the conflict are diminishing. Hence FTSE’s outlook remains tied to the situation there, it remains to be seen whether these rumors are true and if so then I think that we are going to see further losses in the UK index.

A slight retracement higher is not out of the question but the general direction remains negative. If Russia takes action and annexes Crimea and EU follows up with sanction against them then investors will most likely look for safer heavens dragging the FTSE lower along with other European markets.

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alpesh

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